Federal Reserve independence at stake in Lisa Cook's historic Supreme Court case

20 Jan 2026, 14:00 · The Fresno Bee

The optics are astounding.

There is much more at stake this week in the U.S. Supreme Court hearing regarding whether President Donald Trump can fire Federal Reserve Governor Lisa Cook for cause over unsubstantiated allegations of mortgage fraud.

The hearing also determines whether the world's largest and most important central bank can become a political tool of the executive branch, rupturing its historical independence from partisan demands in a move that deeply worries investors and economists around the globe.

The fear: Such a twist could have an acutely damaging impact on interest rates, inflation, and the dollar.

In short, your wallet.

The U.S. Supreme Court on Jan. 21 will hear arguments as to whether President Trump can fire Federal Reserve Governor Lisa Cook, shown here with Fed Chair Jerome Powell, for cause over unsubstantiated allegations of mortgage fraud.

Drago/Bloomberg via Getty Images

Federal Reserve independence under fire

Cook's Jan. 21 hearing comes just days after Fed Chair Jerome Powell announced the Department of Justice had served him subpoenas over the cost of renovations to the Fed's Washington headquarters.

Powell said the threat of an unprecedented criminal investigation, which stunned Fed watchers and legal analysts, was a "pretext" related to the president's year-long demands for drastically lower interest rates.

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The Powell subpoenas undermine " the administration's contention that this is all about Lisa Cook's conduct and not about her votes on monetary policy," Lev Menand, a Columbia University law professor,told The New York Times.

"It all tends to suggest that the goal here is to take over the Fed," he said.

What's at stake in the historic Lisa Cook court case

If President Trump succeeds in removing Cook, her replacement would give his appointees a majority on the Fed's board and greater influence over the central bank's decisions on interest rates and bank regulation, the Associated Press reported.

"The door is open," ‌former Cleveland Fed President Loretta Mester, now an adjunct professor at the University of Pennsylvania's Wharton School of Business, told Reuters.

"The question is how does it get resolved in a way that does not allow whoever is in the president's office to just decide, okay, I don't want that person, I will accuse them of doing something, and that is enough," Mester said.

A Supreme Court ruling in May signaled that the Fed was exempt from executive privilege to fire leaders of federal agencies because it is a "uniquely structured, quasi-private entity."

Jon Faust, a former top adviser to Powell and former Fed Chair Janet Yellen and now an economics professor at Johns Hopkins University, told Reuters that he worried, given the Supreme Court's support of the Trump administration on many other issues, that even if ⁠Cook is left in her job, the outcome will weaken the insulation from political pressure.

Trump pushes for lower interest rates

Shortly after taking office last year, President Trump and his allies began to demand the Fed lower interest rates dramatically to prevent stagflation and recession and reduce the payments on the nation's debt.

The Fed wasn't buying it.

It took a hawkish "wait-and-see" approach to the benchmark Federal Funds Rate, which controls the cost of short-term borrowing.

Powell, at the time, said holding the rates steady was prudent to watch the impact of tariff inflation on the supply chain.

The Fed later lowered the benchmark Federal Funds Rate by three consecutive cuts due to weakening labor market data.

Trump has been berating Powell personally and professionally to cut rates to 1% or less, and at one point mused about firing Powell.

The president has not backed down.

Powell's term as chair expires in May, and Trump has said his selection to replace him must support lower interest rates.

Cook slapped with mortgage fraud allegations

Cook, one of the seven members of the Fed board, is the first black woman to serve as a Federal Reserve governor. A Biden appointee, her 14-year term runs to 2032.

Trump ally William Pulte, the director of the Federal Housing Finance Agency, released bombshell allegations against Cook in August 2025.

Pulte accused Cook of falsifying records to get a more favorable mortgage rate before she was appointed to the Fed by President Joe Biden.
Trump president responded by firing Cook "for cause," the only way a sitting Fed governor may be removed.
Cook denied the allegations and filed suit to retain her seat.
The case made its way up the federal court systems, with two federal judges ruling in Cook's favor.
The Department of Justice appealed to the Supreme Court.

Powell to attend Supreme Court hearing on Cook

Powell plans to attend the high court's session, the Associated Press reported Jan. 19.

He has kept his distance from Cook's case since it began, with the Fed issuing a statement saying it would abide by the court's decision.

Cook has continued to serve as governor and a voting member of the policymaking Federal Open Market committee.

TheStreet

This story was originally published January 20, 2026 at 6:00 AM.